Healthcare

Winter 2016–2017

GTCR Firm Update

Since the firm’s inception in 1980, GTCR has partnered with management teams to build and transform growth businesses, investing over $12 billion in more than 200 companies. We are currently investing out of GTCR Fund XI, a fund we closed in 2014 with $3.85 billion of limited partner equity capital commitments. This fund follows Fund X, which we closed in 2011, with $3.25 billion of equity capital commitments. GTCR Fund X completed 18 platform acquisitions and over 150 add-on acquisitions across the Healthcare; Financial Services & Technology; Technology, Media & Telecommunications; and Growth Business Services sectors. To date, GTCR Fund XI has completed 11 platform investments, including six within the healthcare industry.

Healthcare Group Update

We believe that GTCR’s ~50 healthcare platform investments over our 35-year investment history in the sector have made us one of the leading private equity investors in healthcare. Over the last several years, the GTCR Healthcare team has remained very active both buying and selling healthcare businesses. Since 2010, we’ve made 14 new platform investments and 46 add-on acquisitions, for a total of 60 transactions with a combined purchase price of over $7.9 billion. We have realized many of those investments during the past 24 months, selling six healthcare portfolio companies for a combined enterprise value of more than $5.7 billion. In 2016, we continued to identify attractive opportunities to invest capital in the healthcare industry, completing 11 total acquisitions over the course of this year.

The GTCR Healthcare team established two new healthcare platforms during 2016. Our Maravai LifeSciences portfolio company completed its initial platform acquisition and executed two transformative add-on deals, acquiring three founder-owned life science tools businesses: Vector Labs, TriLink Biotechnologies and Cygnus Technologies. Our second new platform investment was our acquisition of Riverchase Dermatology, one of the largest dermatology practice management platforms in the U.S. In addition, we entered into our third management partnership with Ed Fiorentino, creating TerSera Therapeutics, a specialty pharmaceutical company, as part of our continued execution of The Leaders Strategy™.

We also continued to invest in our existing healthcare portfolio companies throughout 2016. GTCR’s pharmacy-management software business, Rx30, completed three add-on acquisitions this year, including the transformative add-on of its competitor, Computer-Rx. Our Cole-Parmer portfolio company continued its acquisition activities in the specialty lab equipment space, completing two acquisitions in 2016, which supplemented three previous add-on acquisitions since initially carving the business out of Thermo Fisher in August 2014. In addition, our investment in the contract sterilization industry, Sterigenics, significantly increased the scale of its lab testing services business with the acquisition of Nelson Labs in April, then capitalized on Sterigenics’ strong business performance, healthy capital markets and low interest rates by executing a debt-financed dividend recapitalization in November 2016.

As noted, GTCR’s portfolio companies have been highly acquisitive — approximately 80 percent of capital invested since 2000 has been in companies that have completed at least one add-on acquisition. As this activity illustrates, we view inorganic growth as a critical element of value creation and therefore seek to develop robust and creative acquisition strategies. The Healthcare team, in particular, has been very active over the past few years. All of our active healthcare businesses are looking for and evaluating add-on acquisitions.

Below is a snapshot of our recent portfolio company activity. These nine companies completed 15 add-on acquisitions under our ownership.

In August 2014, GTCR partnered with David Snow to form Cedar Gate Technologies. Mr. Snow, a 34-year veteran of the healthcare industry, most recently served as the Chairman and Chief Executive Officer of Medco, one of the nation’s largest pharmacy benefit managers. Mr. Snow joined Medco in March 2003 prior to Merck’s spin out of Medco as a separate publicly traded company. He served as CEO until the company’s approximately $34 billion sale to Express Scripts (NASDAQ:ESRX) in 2012. During Mr. Snow’s tenure, Medco’s revenue grew from $34 billion to more than $70 billion, creating over $28 billion of enterprise value.

Cedar Gate Technologies focuses on acquiring and developing healthcare data and analytics technologies and technology-driven services as part of a strategy to build a leading business in the industry. GTCR and Mr. Snow believe the data and analytics space represents an attractive and growing segment within healthcare technology. Cedar Gate seeks to invest in companies, products and services that help providers and payors understand and manage risk effectively as they transition toward value-based reimbursement.

GTCR may invest up to $200 million of equity capital to support management’s strategy. Mr. Snow serves as Chairman and Chief Executive Officer of Cedar Gate Technologies, and he and his management team will invest alongside GTCR.

In August 2014, GTCR partnered with Bernd Brust to carve out Cole-Parmer Instrument Company (“Cole-Parmer”) from Thermo Fisher Scientific (NYSE:TMO). Cole-Parmer is a leading global manufacturer and distributor of specialty laboratory equipment and instruments to a diverse range of customers in pharmaceutical, biotech, healthcare, chemicals, food and other research-based or regulated markets.

GTCR’s relationship with Mr. Brust dates back to 2009, when he was Chief Commercial Operations Officer at Life Technologies Corporation and responsible for a $3.5 billion global business. Prior to partnering with GTCR, he was President and CEO of Qualicaps, a leading provider of capsule manufacturing and processing equipment for pharmaceutical companies, which was sold to Mitsubishi Chemical Holdings in 2013.

Founded in 1955, Cole-Parmer offers a portfolio of industry-leading brands and private-label products in niche applications to fulfill important needs in the market. The company has deep technical expertise across a range of specialty products in the field of fluid handling, test and measurement, electrochemistry, and other laboratory products. The company sells its products across a range of end markets to a diverse global customer base.

Since GTCR’s initial investment in 2014, Mr. Brust and the Cole-Parmer team have successfully carved out the business from Thermo Fisher, invested in organic growth and completed five complementary add-on acquisitions to grow the company’s proprietary product portfolio, manufacturing capabilities and geographic footprint. The company is actively pursuing a large M&A pipeline and aims to continue adding complementary products and capabilities.

In July 2014, CHC merged with Correct Care Solutions (“CCS”), a portfolio company of Audax Management and Frazier Healthcare Partners. The combination of CCS and CHC created a strong player in the growing public jails segment of the market and one of the largest companies in the outsourced correctional healthcare industry. The combined company leverages the scale of its infrastructure and clinical capabilities in order to capitalize on the continuing trend toward outsourcing. The combined company operates under the CCS name and is led by CCS Founder and Executive Chairman Jerry Boyle and CEO Jorge Dominicis.

In March 2015, CCS completed the add-on acquisition of a provider of healthcare and claims processing services to the Federal Bureau of Prisons.

In 2014, GTCR partnered with Carl Hull to form Maravai LifeSciences (“Maravai”) as part of a strategy to build a leading life science tools and diagnostics company. Mr. Hull is a 30-year veteran of the diagnostic and life sciences industry. He previously served as Chief Executive Officer of Gen-Probe, a leading molecular diagnostic company. His leadership helped reposition Gen-Probe for commercial growth, culminating in its eventual sale to Hologic (NASDAQ:HOLX) for $3.7 billion.

In April 2016, Maravai completed its platform acquisition of Vector Laboratories (“Vector”), a founder-owned immunohistochemistry reagents company. Since its initial platform investment, Maravai has completed two additional acquisitions of other founder-owned life science reagents businesses that help broaden the chemistry portfolio of Maravai's Vector business. In September 2016, Maravai acquired TriLink Biotechnologies (“TriLink”), a manufacturer of specialty oligonucleotide reagents. Then in October 2016, Maravai acquired Cygnus Technologies (“Cygnus”), a manufacturer of analytical chemistry reagents used in biologic drug development.

Together, these three businesses form the basis for a differentiated portfolio of life science products that fit well with the Maravai team’s collective experience. Vector’s products include labeling and detection reagents and consumables used by medical and scientific researchers; TriLink’s products include synthetic DNA and RNA products used in genomic applications; and Cygnus’ products include test kits and immunoassay reagents used to evaluate process-related impurities and contaminants within the biologic drug development and manufacturing process.

With the combination of Vector, TriLink and Cygnus, Maravai now has the scalable infrastructure to pursue the fragmented landscape of attractive add-on acquisitions and build Maravai into a market-leading life science tools and diagnostics company.

Riverchase Dermatology, Fort Myers, FL

CEO: Andrew Jaffe

Platform Acquisition: October 2016

In October 2016, GTCR partnered with Founder and CEO Andrew Jaffe to recapitalize Riverchase Dermatology. Riverchase is a leading dermatology practice management company with a large geographic presence in the southeastern U.S. Riverchase provides general, surgical and cosmetic dermatology, as well as related pathology lab services with a determined focus on clinical quality. Founded in 2000, Riverchase has become one of the largest dermatology practice management platforms in the U.S., with 25 locations in Florida.

The acquisition of Riverchase is the result of GTCR’s continued proactive efforts in the dermatology space, a market that is highly fragmented today and benefits from good supply-and-demand economics. The investment also builds upon the firm’s significant experience investing in multi-site healthcare services companies, including ATI Physical Therapy, Capella Healthcare and Curo Health Services.

GTCR and the Riverchase management team are focused on continuing to grow the company both organically and through strategic M&A. GTCR and Riverchase are actively pursuing de novo and acquisition opportunities to expand the company’s geographic footprint and service offering.

Rx30 (Transaction Data Systems), Ocoee, FL

CEO: Steve Wubker

Platform Acquisition: June 2015 | Recent Transaction: October 2016

In June 2015, GTCR acquired Rx30, a leading developer and provider of pharmacy management and transaction processing software solutions to the independent retail, hospital, long-term care and specialty pharmacy markets. As part of the transaction, GTCR partnered with Rx30’s CEO, Steve Wubker. Dedicated to the independent pharmacy market for the last 35 years, Rx30 offers a suite of market-leading software solutions to enable prescription filling, inventory management and other critical functions for its pharmacist customers. The company has deep expertise in providing cutting-edge technology solutions to help pharmacy owners streamline their operations, improve financial performance and better manage their businesses. Rx30 sells its technology to pharmacies across the United States, Mexico and the Caribbean. Since the initial acquisition, GTCR and Rx30 have completed three add-on acquisitions, including Computer-Rx and Lagniappe Pharmacy Services, both providers of pharmacy management software sold primarily to independent pharmacies, and vMedex, a developer of SaaS medication therapy management tools for retail and long-term care pharmacies.

The investment in Rx30 is the result of GTCR’s continued proactive efforts in the healthcare IT sector. Following GTCR’s recent investments in XIFIN and Cedar Gate Technologies, Rx30 represents GTCR’s third recent investment within healthcare IT, an area of focus for the firm over the past several years.

In 2011, GTCR partnered with Michael Mulhern, the successful CEO of two previous GTCR investments, to acquire Sterigenics, the leading global provider of contract sterilization services for medical devices, food products and other advanced applications across a global network of 40 sterilization facilities.

Between 2011 and 2015, the company completed three add-on acquisitions, including the transformative acquisition of Nordion, to create the only vertically integrated sterilization services company in the world.

In May 2015, GTCR recapitalized Sterigenics in partnership with Warburg Pincus and Sterigenics’ management team. Subsequent to the recapitalization, Sterigenics has completed three additional acquisitions, Companhia Brasileira de Esterilização (“CBE”), a Brazilian sterilization company, in August 2015; Nelson Labs, a microbiology testing lab, in April 2016; and Reviss, a Cobalt-60 supplier, in October 2016. Sterigenics also completed a debt-financed dividend recapitalization in November 2016.

In June 2016, Michael Mulhern was appointed to serve as Executive Chairman of the Board, with Michael Petras joining as the CEO. Mr. Petras joined Sterigenics from Cardinal Health, where he served as President of the Post-Acute Solutions business. Before joining Cardinal, Mr. Petras was the CEO of AssuraMed, a leading medical products supplier, which Cardinal Health acquired for $2 billion in 2013.

Sterigenics continues to leverage and expand its global network of service centers to better serve existing and new customers. The company is seeking additional acquisitions in the sterilization and lab testing markets, as well as potentially broader and more transformative opportunities.

TerSera Therapeutics, Lake Forest, IL

CEO: Ed Fiorentino

Management Partnership: February 2016

In February 2016, GTCR formed TerSera Therapeutics in partnership with Ed Fiorentino. TerSera is the third partnership between GTCR and Mr. Fiorentino and another example of the GTCR Leaders Strategy™. Previously, Mr. Fiorentino was Chairman and Chief Executive Officer of Crealta Pharmaceuticals LLC (”Crealta”), a GTCR-funded specialty pharmaceutical company that was acquired in January 2016 by Horizon Pharma plc (NASDAQ:HZNP). Through organic growth initiatives and four transactions, Crealta built a unique specialty pharmaceutical company focused on niche therapeutic markets within rheumatology and the central nervous system. The partnership between Mr. Fiorentino and GTCR has contributed to the firm’s position as a leading private equity investor in the pharmaceutical sector.

TerSera is focused on acquiring specialty pharmaceutical companies, carving out undermanaged products from large pharmaceutical companies, and growing through targeted promotion strategies and lifecycle management programs. Current target acquisition opportunities include products that are already approved or currently marketed, as well as late-stage development assets.

XIFIN, San Diego, CA

CEO: Lâle White

Platform Acquisition: July 2014 | Recent Transaction: May 2015

In July 2014, GTCR acquired XIFIN, a market-leading SaaS provider of billing and reimbursement solutions to diagnostic laboratories. As part of the transaction, GTCR partnered with Founder and CEO Lâle White. XIFIN’s technology platform enables end-to-end connectivity from patient to payor, linking together the many stakeholders in healthcare delivery and optimizing for the best business and patient outcomes. XIFIN’s technology plays a critical role in a laboratory’s financial performance. As a result, the company has a stable recurring revenue base with high renewal rates and a history of consistent growth.

XIFIN completed two acquisitions in 2015, adding product capabilities to XIFIN’s technology platform and expanding the company’s market presence. The company continues to enhance its position as a market-leading provider of health economic optimization across the diagnostic service provider landscape by adding new customers and evaluating add-on acquisitions and strategic partnerships.

Ben Daverman joined GTCR in 2008 and was promoted to Managing Director in 2016. Prior to joining GTCR, he worked as a Venture Capitalist at Alta Partners, as well as an Investment Banking Associate at JMP Securities and an Analyst in the Mergers & Acquisitions group at J.P.Morgan (formerly Hambrecht & Quist). He holds an MBA from the Wharton School at the University of Pennsylvania and a BA in history magna cum laude from Colgate University. Ben also holds a master’s degree in biotechnology from the School of Applied Sciences & Engineering at the University of Pennsylvania.

Ben is active in the community and serves on the executive board of Spark Program, a national non-profit that provides transformative apprenticeships for at-risk middle-school students.

Associate

Nick Okano joined GTCR in 2016. Prior to joining GTCR, he worked as an Investment Banking Analyst in the Mergers & Acquisitions group at Bank of America Merrill Lynch. Nick graduated from Yale University with a BA in economics.

Associate

Jonathan Skekloff joined GTCR in 2016. Prior to joining GTCR, he worked as a Senior Associate Consultant with the Industrials and Healthcare practices at L.E.K. Consulting. Jonathan graduated summa cum laude from the University of Pennsylvania with a BA in philosophy, politics and economics.

*This information represents the approximate number of platform acquisitions and add-on acquisitions, and the aggregate purchase price associated with such acquisitions, completed by GTCR’s Healthcare group since 2000, as of November 30, 2016. The actual amounts may exceed the amounts set forth above and, with respect to purchase price, include the amount paid by all investors in the applicable GTCR portfolio company. This information is for illustrative purposes only and reflects investments that were made across multiple funds during different economic cycles. This information does not relate to fund or portfolio company performance. If a portfolio company has been categorized in more than one industry group by GTCR, it may be separately included in the number of platform acquisitions and add-on acquisitions, and the aggregate purchase price associated with such acquisitions, completed by each group.

This newsletter is for illustrative and informational purposes only. This newsletter is not an offer to sell or a solicitation of an offer to buy an interest in any private fund sponsored by GTCR LLC (“GTCR”) or any of its affiliates or any other entity. This newsletter was not prepared for existing or potential investors in such funds and may not be used or relied upon for any investment purpose whatsoever. GTCR assumes no responsibility or liability for, and expressly disclaims any obligation or undertaking to update, the information contained in this newsletter.

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